Persistent gene therapy in dividing cells such as hematopoietic stem cells generally requires that the therapeutic transgene be integrated into a chromosome, for example, using a retrovirus. There are several drawbacks to this approach, including the possibility that integration at an inopportune locus can cause cancer, and a lack of appropriate gene regulatory elements. In contrast, gene targeting by homologous recombination allows one to place a transgene into a predetermined, safe, location in the genome. The difficulty in making use of gene targeting for gene therapy is that it occurs only rarely in most cells. However, it has previously been shown that introducing a double strand break at the site to be targeted can increase the homologous recombination frequency by up to five orders of magnitude in mammalian cells. This proposal seeks to define optimal methods for inducing gene targeting with a retargetable endonuclease that specifically cuts at the ROSA26 locus in the mouse genome. ROSA26 is an ideal site for transgene expression because it is ubiquitously expressing and non-essential. The endonuclease is derived from the ICrel enzyme and has sufficient specificity to be able to target particular sites in a mammalian genome, and is sufficiently modifiable that it can be designed to target most loci. First, the ability of the engineered endonuclease to induce gene targeting in mouse cell-lines will be demonstrated. Green fluorescent protein will be used as a model transgene. Second, optimal methods to induce gene correction in hematopoietic stem cells while maintaining their ability to reconstitute the blood of a myelpablated individual will be determined. Finally, methods for increasing the fraction of correctly targeted cells in a hematopoietic cell transplant, based on expansion in culture and selection with flow cytometry sorting prior to transplant, will be developed. Current methods aimed at genetically curing certain inherited blood diseases have drawbacks, such as the possibility of causing cancer and low efficacy. This proposal seeks to define new methods to more precisely correct the inherited mutations that cause these disorders, thereby eliminating some of the dangers and disadvantages of current gene therapy protocols.